Freddie Mac Eases Mortgage Rules to Limit Putbacks

Melvin "Mel" Watt, director of the Federal Housing Finance Agency. Watt, who became head of the FHFA in January, is scheduled to speak tomorrow in Washington to outline his approach as tight credit slows a two-year housing recovery. Photographer: Andrew Harrer/Bloomberg

May 12 (Bloomberg) -- Freddie Mac, which along with Fannie
Mae has forced home lenders to buy back tens of billions of
dollars of flawed mortgages, said the companies are loosening
rules that made banks more cautious about extending credit.

The government-backed companies will expand the pool of
loans that become exempt from putback requests, Freddie Mac said
in a memo to lenders today. Under the new rules, loans will
typically be spared from such demands if borrowers make 34 of
their first 36 scheduled monthly payments. Previously, borrowers
needed to avoid delinquency for the first three years.

The changes were developed at the direction of the Federal
Housing Finance Agency, the overseer of Fannie Mae and Freddie
Mac. Melvin L. Watt, who became head of the FHFA in January, is
scheduled to speak tomorrow in Washington to outline his
approach as tight credit slows a two-year housing recovery.
First-time buyers and those with weaker credit have faced
trouble getting mortgages from lenders seeking to avoid defaults
and putbacks.

“The good news is the FHFA clearly is aware of this as a
concern and I think they’re aware this is also a potential
impediment to broadening credit access,” said David Stevens,
president of the Mortgage Bankers Association.